REVISEDGUIDELINES ON THE IMPLEMENTATION OF THE 13TH MONTH PAY LAW.

1. Removalof Salary Ceiling. OnAugust 13, 1986, President Corazon OrderNo.28 which provides as follows: C. Aquino issued M emorandum

"Section1 of Presidential Decree No. 851 is hereby modified to the extent thatall employers are hereby required to pay all their rank-and-fileemployeesa 13th month pay not later than December 24 of every year."chan robl es virtual l aw l ibrary Beforeits modification by the aforecited M emorandum Order, P.D. No. 851excludesfrom entitlement to the 13th month pay those employees who werereceivinga basic salary of more than P1,000.00 a month. W ith the removal of thesalary ceiling of P1,000.00, all rank and file employees are nowentitledto a 13th month pay regardless of the amount of basic salary that theyreceive in a month if their employers are not otherwise exempted fromtheapplication of P.D. No. 851. Such employees are entitled to the benefitregardless of their designation or employment status, and irrespectiveof the method by which their wages are paid, provided that they haveworkedfor at least one (1) month during a calendar year. 2. ExemptedEmployers. Thefollowing employers are still not covered by P.D. No. 851: a. TheGovernment and any of its political subdivisions, includinggovernmentownedand controlled corporations, excepts those corporations operatingessentiallyas private subsidiaries of the Government; b. Employersalready paying their employees a 13th month pay or more in a calendaryearor its equivalent at the time of this issuance; c. Employersof household helpers and persons in the personal service of another inrelation to such workers; and d. Employersof those who are paid on purely commission, boundary, or task basis,andthose who are paid a fixed amount for performing specific work,irrespectiveof the time consumed in the performance thereof, except where theworkersare paid on piece-rate basis in which case the employer shall grant therequired 13th month pay to such workers. Asused herein, workers paid on piece-rate basis shall refer to those whoare paid a standard amount for every piece or unit of work producedthatis more or less regularly replicated, without regard to the time spentin producing the same.

Theterm "its equivalent" as used on paragraph (b) hereof shall includeChristmasbonus, mid-year bonus, cash bonuses and other payments amounting to notless than 1/12 of the basic salary but shall not include cash and stockdividends, cost of living allowances and all other allowances regularlyenjoyed by the employee, as well as non-monetary benefits. W here anemployerpays less than required 1/12th of the employees basic salary, theemployershall pay the difference.chan robl es virtual l aw l ibrary 3. W hoare Rank-and File Employees. TheLabor Code distinguishes a rank-and-file employee from a managerialemployee.It provides that a managerial employee is one who is vested with powersof prerogatives to lay down and execute management policies and/or tohire,transfer, suspend, lay-off, recall discharge, assign or disciplineemployees,or to effectively recommend such managerial actions. All employees notfalling within this definition are considered rank-and-file employees. Theabove distinction shall be used as guide for the purpose of determiningwho are rank-and-file employees entitled to the mandated 13th month pay. 4. Amountand payment of 13th M onth Pay (a) M inimumof the Amount. The minimum 13th month pay required by law shall notbeless than one-twelfth of the total basic salary earned by an employeewithina calendar year. For the year 1987, the computation of the 13th monthpayshall include the cost of living allowances (COLA) integrated into thebasic salary of a covered employee pursuant to Executive Order 178. E.O.No. 178 provides, among other things, that the P9.00 of the daily COLAof P17.00 for non-agricultural workers shall be integrated into thebasicpay of covered employees effective 1 M ay 1987, and the remaining P8.00effective 1 October 1987. For establishments with less than 30employeesand paid-up capital of P500,000 or less, the integration of COLAs shallbe as follows: P4.50 effective on 1 M ay 1987; P4.50 on 1 October 1987;and P8.00 effective 1 January 1988. Thus, in the computation of the13thmonth pay for 1987, the COLAs integrated into the basic pay shall beincludedas of the date of their integration. W herethe total P17.00 daily COLA was integrated effective 1 M ay 1987 orearlierthe inclusion of said COLA as part of the of the basic pay for thepurposeof computing the 13th month pay shall be reckoned from the date ofactualintegration. The"basic salary" of an employee for the purpose of computing the 13thmonthpay shall include all remunerations or earning paid by this employerforservices rendered but does not include allowances and monetary benefitswhich are not considered or integrated as part of the regular or basicsalary, such as the cash equivalent of unused vacation and sick leavecredits,overtime, premium, night differential and holiday pay, andcost-of-livingallowances. However, these salaryrelated benefits should be includedaspart of the basic salary in the computation of

the 13th month pay if byindividual or collective agreement, company practice or policy, thesameare treated as part of the basic salary of the employees. (b) Timeof Payment. The required 13th month pay shall be paid not later thanDecember 24 of each year. An employer, however, may give to hisemployeesone half () of the required 13th month pay before the openingofthe regular school year and the other half on before the 24th ofDecemberof every year. The frequency of payment of this monetary benefit may bethe subject of agreement between the employer and therecognized/collectivebargaining agent of the employees. 5. 13thM onth Pay for Certain Types of Employees. (a) EmployeesPaid by Results. Employees who are paid on piece work basis are bylawentitled to the 13th month pay. Employeeswho are paid a fixed or guaranteed wage plus commission are alsoentitledto the mandated 13th month pay, based on their total earnings duringthecalendar year, i.e., on both their fixed or guaranteed wage andcommission. (b) Thosewith M ultiple Employers. Government employees working part time in aprivate enterprise, including private educational institutions, as wellas employees working in two or more private firms, whether on full orparttime basis, are entitled to the required 13th month pay from all theirprivate employers regardless of their total earnings from each or alltheiremployers.chan robl es virtual
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(c) PrivateSchool Teachers. Private school teachers, including faculty membersofuniversities and colleges, are entitled to the required 13th month pay,regardless of the number of months they teach or are paid within ayear,if they have rendered service for at least one (1) month within a year. 6. 13thM onth Pay of Resigned or Separated Employee. Anemployee who has resigned or whose services were terminated at any timebefore the time for payment of the 13th month pay is entitled to thismonetarybenefit in proportion to the length of time he worked during the year,reckoned from the time he started working during the calendar year uptothe time of his resignation or termination from the service. Thus, ifheworked only from January up to September his proportionate 13th monthpayshould be equivalent of 1/12 his total basic salary he earned duringthatperiod. Thepayment of the 13th month pay may be demanded by the employee upon thecessation of employer-employee relationship. This is consistent withtheprinciple of equity that as the employer can require the employee toclearhimself of all liabilities and property accountability, so can theemployeedemand the payment of all benefits due him upon the termination of therelationship.

7. Non-inclusionin Regular W age. Themandated 13th month pay need not be credited as part of regular wage ofemployees for purposes of determining overtime and premium pays, fringebenefits insurance fund, Social Security, M edicare and privateretirementplans. 8.
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Prohibitionsagainst reduction or elimination of benefits.

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Nothingherein shall be construed to authorize any employer to eliminate, ordiminishin any way, supplements, or other employee benefits or favorablepracticebeing enjoyed by the employee at the time of promulgation of thisissuance.

(Sgd.)FRANKLIN M . DRILON Secretary